By Pete Najarian
Yum Brands (YUM) is attracting some upside option activity after seeing two upgrades in as many days.
The casual-dining company closed yesterday up 0.77 percent on the day to $36.88 and rose another 0.33 percent in after-hours trading, following a new 52-week high of $36.99 yesterday. YUM has been trading sideways for nearly a year but could be poised to finally break out of its range, which has been mostly between $32.50 and $36.50 since April 2009.
optionMONSTER's Heat Seeker system shows that traders were focused on the April 38 strike, turning over nearly 11,000 calls against open interest of 1,114 contracts. Many of these calls--which had averaged a grand total of 48 per day for the last month--were bought for $0.45 to $0.60. Overall calls in the name outnumbered total puts by about 4 to 1.
Yesterday Credit Suisse reiterated its "outperform" rating for Yum Brands and raised its price target to $44 from $41, while UBS upgraded the stock Tuesday to "buy" from "neutral" and lifted its target to $44 from $38. The moves on YUM, which has extensive reach in Asia, followed strong international sales numbers reported by McDonald's (MCD) earlier in the week.
For the calls purchased yesterday to turn a profit, the shares need to gain roughly 5 percent by the time the options expire on April 16. The company is scheduled to release its next earnings report two days before, on April 14.
Disclosure: Author owns YUM calls
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